Updated from 9:57 a.m. EST
In what is being called the most expensive land sale in Arizona history,
Simon Property Group
have purchased a 5,485-acre parcel in northwest Phoenix for $312 million.
The initial plans are for a mixed-use, master-planned community, with about 4,840 acres containing single-family homes and attached homes. The property was sold by
, which uses it for vehicle testing and automotive development. DaimlerChrysler will continue to lease the property for the next few years.
Toll Brothers and Meritage each plan to build a "significant" number of homes on the site. Simon Property, the country's largest mall owner, has the option to purchase a large portion of the commercial property. Other parcels may be sold to third parties, the press release states.
Home sales are expected to begin in 2009. The site's general plan allows for 15,000 to 31,000 homes.
About 645 acres of commercial and retail development will include schools, community amenities and open space.
Toll Brothers said research published in
The Arizona Republic
calls this the most expensive land transaction recorded in Arizona history.
It's not clear how the joint venture is being structured. Stephen East, an analyst with Susquehanna Financial, says he believes Toll has a slightly larger ownership than Meritage.
"I think from a strategic standpoint it's great for both of them," East says. "If you go to the Phoenix market you just see (housing) pushing further and further out. This is a pretty attractive piece of land. It looks like it was a reasonable purchase price at $57,000 an acre. It gives them both tremendous land position for years and year to come."
Phoenix was the hottest housing market in the country last year. For the quarter ending Sept. 30, the National Association of Realtors says the area's median sales price rose 55% year over year to $268,000.
Much of the run-up in prices was due to investors pouring into Phoenix from California and other outside markets to drive up prices and flip properties for a quick buck. However, the area's economy looks strong -- even though so much of the recent growth has been tied to the residential real estate boom. The latest monthly Arizona Business Conditions Index rose to 69.7 in December, according to the W.P. Carey School of Business at Arizona State University. A reading above 50 indicates growth.
But there are some troubling signs in the Phoenix housing market in the near term. The Arizona Real Estate Center at Arizona State University, in its third-quarter 2005 update on the market, noted that there is "mounting concern" about the sustainability of the current pace.
"The fundamental issue is potential homeowners with stagnant incomes confronting higher home prices and mortgage rates," the report says. "Basically, the housing market could be limited by the inability of potential buyers to afford or desire any changes in their current housing situations.
"For the ever-important job market, the quarterly average has been near 90 jobs per resale home, while it's currently 65 jobs. This would imply that the housing market is growing faster than the underlying job and income elements of the economy. Historically, it has never been good for the long run when an investment begins to disconnect from the basic economic forces," the report states.
The center isn't predicting a massive real estate crash in Phoenix, but says the area could fall under pressure, especially if wages stagnate.